One of the most important questions in developmental biology concerns how cells "know" their positions in a developing embryo or tissue. Morphogenetic gradients are proposed to confer such positional information to cells. In Drosophila, the early syncytial embryo allows maternally contributed proteins such as Bicoid (Bcd) to diffuse freely and form concentration gradients. Bcd, an anterior-to-posterior gradient and a transcription factor, is responsible for establishing the anterior-posterior polarity by specifically activating zygotic genes in a concentration-dependent manner in embryos. Since the direct and biologically relevant downstream target genes of Bcd are known, this system represents an excellent model for understanding how target genes respond to a transcription factor gradient. It has been proposed previously that the Bcd affinity for an enhancer determines the concentration of the protein required for activating transcription in embryos. But this simple affinity-threshold model has recently been challenged by studies from several laboratories including our own. Our overall hypothesis is that the highly selective and concentration-dependent actions of Bcd during development are controlled by specific functions of Bcd and its regulatory cofactors. Our strategy toward dissecting functions critical to normal development is to analyze Bcd mutants and mutant backgrounds that can cause specific defects, using both genetic and biochemical approaches; these efforts will be further complemented by a collaborative structural study of the Bcd homeodomain. We propose three specific aims to address three questions: 1) How is the activity of Bcd regulated during development? 2) How do different genes respond to distinct Bcd concentrations in embryos? 3) How does Bcd specifically select its natural target genes for activation during development? Answers to these questions will significantly enhance our understanding of not only how Bed works in particular but also how morphogenetic gradients work in general.